Free Enterprise as Conspiracy

The recent surge of academic interest in 20th century conservatism, libertarianism, and associated developments in free-market economic thought also carries with it a curious historiographical implication. Encompassing contributions by authors such as Kim Phillips-Fein, Quinn Slobodian, Bethany Moreton, Kevin Kruse, and Nancy MacLean, the genre varies widely in scholarly quality. Its contributors nonetheless share a pronounced ideological hostility to their subject matter, which in turn shapes how they select and construe their source materials.

While an antagonistic political lens is not necessarily discrediting, it can introduce interpretive biases—particularly when an author approaches the past in search of a deeper explanation for his or her own grievances with the current political climate. The approach taken in these works essentially conspiracizes the mundane—a practice of treating routine historical records from disliked conservative, libertarian, or free-market sources as if they were evidence of a collective will to politically transform the mechanism of history in ways that disrupt a specific course of progressive political development desired by the author. A predictable assortment of problematic consequences in the present allegedly follows from the decades-long designs they claim to have identified: the 2007-2008 financial crisis, environmental degradation, rising inequality, the political ascendance of the religious right, and Trump.

Lawrence Glickman’s Free Enterprise: An American History offers the latest contribution to this booming yet peculiar subfield. Styled as an intellectual history of the concept, his thesis holds that “free enterprise” is essentially a constructed mythology that arose from political opposition to the New Deal. Over the course of the 20th century, this version of “free enterprise” recast economic interventionism as an aberration from an artificially constructed history of the pre-Roosevelt American economy. The New Deal accordingly represented a break from an earlier time in which business and government occupied separate spheres, the latter constrained in its powers and proscribed from meddling in the affairs of the former. Glickman essentially sees the “free enterprise” concept as attempt to retrofit a factitious historical barrier to what he perceives as routine and necessary progressive policy responses to the Great Depression. In his telling, the myth’s expositors—mostly a group of business interests and associated free-market intellectuals—set out to morally “delegitimize” the New Deal order and with it “the most basic functions of government,” namely taxation, regulation, and public expenditures.

As with many other works in this genre, Glickman traces confirmation of this alleged design to a key document—a 1971 memorandum warning of an “attack” on the “American Free Enterprise System” that future Supreme Court Justice Lewis Powell prepared for the U.S. Chamber of Commerce. The Powell memorandum has since become something of a bête noire in the conspiratorial corners of the “neoliberalism” literature to explain the alleged political successes of “big business” in thwarting a litany of progressive causes. Glickman accepts this interpretation by passive deference to its reputation, noting “It came to be seen by many commentators in the twenty-first century as the key to the conservative resurgence of the last quarter of the twentieth century.” Yet he also sees the memorandum as a synthesizing apotheosis of the free enterprise concept, offered—albeit unknown to its author—at what would become a turning point in the political fortunes of the New Deal order. Rather than a blueprint for the alleged “neoliberal” ascendance, the Powell memorandum unveiled a political consummation of the ideas behind the original attack on Roosevelt’s program some four decades earlier.

In Glickman’s telling, that attack amounted to a “one-sided war” upon the New Deal by business interests and other defenders of “free enterprise,” all rooted in the aforementioned myth-making. While he offers a moderately interesting etymology of the phrase and its diverse political claimants dating back to the nineteenth century, the core of his myth-making narrative suffers deeply from the epistemic distortions of the book’s ideological hostility to its subject.

In particular, Glickman’s own political commitments to the New Deal (and progressivism more broadly) effectively render him unable to even fathom the existence of valid economic criticisms for Roosevelt’s policies, or their long-term effects on the United States’ fiscal picture to the present day. Rather, the New Deal is simply “an outgrowth of democratic processes” and unassailable as such. Its critics, past and present, are reduced to myth-toting caricatures, and casually brushed aside as expositors of a near-religious devotion to the artificially constructed “free enterprise” concept. This rhetorical move allows the author to sidestep any engagement with salient criticisms of New Deal policies and political actors. It’s much easier to recast the critics as fanatics under the “talismanic” trance of a dismissed concept.

Glickman accordingly bristles at the suggestion that the New Deal unintentionally “prolonged and deepened rather than ameliorated the Depression,” even as modern empirical scholarship has lent strong support to that exact contention.[1] He discounts any concern with the deficit-inducing budget strains of Social Security and similar programs on account of their popularity. Rather than substantive considerations of public finance, such concerns become the manipulated products of a “ready-made vocabulary” that unfairly recasts progressive beneficence as “entitlements” and disparages the only solution to their budgetary demands that he is personally willing to countenance—higher taxes on the wealthy.[2]

He similarly sees only fear-mongering over the specters of European communism and fascism in contemporary business complaints about Roosevelt’s affinity for economic central planning, borrowing but also grossly oversimplifying F.A. Hayek’s metaphor about the road to serfdom to impart the irrational alarmism of the slippery slope into the claim. Contrast that assessment with the New Deal architect Rexford Tugwell who, upon meeting with Benito Mussolini in 1934, boasted that the Italian fascist system was the “cleanest, neatest most efficiently operating piece of social machinery I’ve ever seen.”[3] One need not speculate that the early New Dealers drew inspiration from Europe’s totalitarian regimes in the decade before the world descended into war with those very same powers. They openly boasted of doing so themselves.

The resulting study bears greater resemblance to a political argument for the Roosevelt administration’s revival via large scale public spending projects and accompanying taxation than an exercise in dispassionate historical analysis. An unfortunate result is an ostensible history of “free enterprise” that almost completely omits the concept’s historical use as a philosophical foil to the Soviet Union and central planning. In fact, Glickman consciously excludes this dimension from his study at the outset by little more than a wave of the hand: “Although what we might call ‘the age of free enterprise’ … coincided almost precisely with the Cold War battle against Soviet communism, proponents described the dire threats to the system as primarily domestic, not foreign.”

The severity of the error in this assessment may be readily ascertained by looking no further than mainstream mid-century political discourse. As Dwight Eisenhower contended in a celebrated 1950 speech that helped to propel him into the presidency, the communist world had “embarked upon an aggressive campaign to destroy free government… because regimentation cannot face the peaceful competition of free enterprise.” Or consider Harry Truman’s 1953 State of the Union Address, recounting that the Soviets had predicted an American reversion into the Great Depression after the end of World War II: “We answered that question—answered it with a resounding ‘no.’ Our economy has grown tremendously. Free enterprise has flourished as never fore.” John F. Kennedy’s never-delivered Trade Mart Address from the day of his assassination planned to contrast the military ambitions of international communism with “the strength and skill of American science, American industry, American education, and the American free enterprise system.” Or as Lyndon Johnson succinctly put it in a 1964 interview, “we have one thing [the Soviets] don’t have, and that is our system of private enterprise, free enterprise.” By attempting to pigeonhole the term to its domestic political uses, Glickman has somewhat astonishingly managed to completely miss its central place in mid-twentieth century geopolitics.

Similar oversights and misconstructions of evidence pervade the remainder of the book, and particularly its author’s attempts to characterize the philosophical underpinnings of the “free enterprise” concept. In a bizarre treatment of Leonard Read’s classic essay I Pencil, Glickman seizes upon the story’s use of religious metaphors to reinterpret its message as a profession of spiritual devotion to free markets. “Faith is the key word” to understanding the essay, he claims, as the pencil’s construction supposedly proved that “it was not possible to understand or explain the complex and far-flung workings of the market.” Instead, free enterprise amounted to a faith-based expression of devotion to Adam Smith’s “invisible hand”—a metaphor that Glickman sees in strictly religious terms “since it hinted at a divine basis of market operations.”

Read was a practicing Christian and wrote in an allegorical style. Still, one cannot help but conclude that Glickman’s textual analysis misses the forest for the trees. The resulting examination evinces no awareness of the allegory’s main economic lesson, namely that the division of labor across specialized tasks in pencil production solves the knowledge problem of constructing a complex product from scratch and does so without any centralized planning. Read’s essay, of course, was never intended for anything more than a grade school lesson in economic thinking, written at a time when Soviet-style industrial planning was put forth as the primary competitor to the “free enterprise” concept. Yet Glickman’s analysis falls short of reaching even that introductory level of engagement.

As in many other works in the history of conservatism, Glickman devotes substantial energy to linking “free enterprise” with racial segregation in the civil rights era, implying a nuanced but certain political overlap between the two causes. While we can duly acknowledge the mixed record of the business community (as well as less-discussed labor union interests) on civil rights issues at the mid-century mark, the analysis presented here exhibits an uneven and tendentious use of sources. Evidence that goes against the posited commonality between the free-market economics and discrimination is largely omitted or misconstrued.

Consider the case of California newspaper publisher R.C. Hoiles, who elsewhere Glickman credits as “one of the [free enterprise] phrase’s biggest champions.” A more balanced history might have noted that Hoiles was one of the first major publishers to endorse racial integration in schools, launching an editorial attack on the Santa Ana, California school board for its policy of separating white and Hispanic children some five years before Brown v. Board of Education.[4] Hoiles similarly condemned the race-based policy of Japanese Internment during World War II. Yet instead of examining these historically noteworthy arguments from an acknowledged leading popularizer of the “free enterprise” concept, Glickman instead directs his reader to cherry-picked editorials grousing about “Civil Rights agitation” and its alleged threat to business in the Spokane Spokesman-Review and other similarly unremarkable sources.

Elsewhere Glickman points to an alternative conceptualization of “free enterprise” as a tool to circumvent forms of market discrimination that excluded African-Americans from economic life, presenting this rendering of the term as oppositional to the non-interventionist or capitalist variant that he associates with thinkers such as Milton Friedman or F.A. Hayek. The dichotomy is overly simplistic though, and shoehorned into a New Deal-centric narrative that only permits a tension between race and business interests. Indeed, he appears to be unaware that Friedman made a very similar argument about market circumventions to Jim Crow in his 1962 book Capitalism and Freedom, drawing on a groundbreaking academic study of the same by his doctoral student Gary Becker.

In the end, Free Enterprise: An American History presents a flawed analysis that reveals more about the historiographical effects of its author’s thick ideological lens than the history of its titular term. Yet even apart from the book’s political skew, an informed reader will encounter multiple signs that Glickman is deeply unfamiliar with his subject.

At one point in the text Albert Jay Nock, the classical liberal journalist, becomes “Alfred.” Several successive references suggest Glickman is unaware that Virginia politician Harry Flood Byrd, Sr., was a different person than his son of a shared name. He refers to the younger Byrd as the state’s “longtime senator” in a discussion of a 1972 speech, even though he had served only a term after taking over his late father’s seat a few years prior, while additional references to the father’s speeches a generation earlier are indexed to the son’s name. Merwin K. Hart, a fringe anti-Semitic publisher, finds himself promoted to the position of “New York congressman” in a discussion of a 1937 attack on the New Deal. And returning to the paradigmatic document at the heart of the mundane conspiracy itself, Glickman confuses the identity of the commissioning recipient of the Powell memorandum. The document was prepared for Powell’s friend and neighbor Eugene Sydnor, whereas Glickman initiates his analysis of the memorandum, as well as the book itself, with a lengthy discussion of another Sydnor named Charles.

Errors of historical fact and errors of historical interpretation often go hand-in-hand, reflecting a general approach that eschews the broader process of scholarly discovery and instead selectively seeks out bits and pieces of evidence in order to fit the past to a preconceived narrative. A history of the “free enterprise” concept remains a potentially fertile area for scholarly discovery, particularly its under-explored use as a foil to Soviet socialism. Unfortunately, as the many inaccuracies discussed here reveal, readers of this book should not expect much more than a historical brief for its author’s present-day politics.

[1] See e.g. Harold L. Cole and Lee E. Ohanian. “New Deal policies and the persistence of the Great Depression: A general equilibrium analysis.” Journal of Political Economy 112.4 (2004): 779-816; Robert Higgs, Depression, War, and Cold War. Oxford University Press, 2006, Chapter 1.

[2] Contra Glickman’s impressing of a “nihilistic” normative connotation to it (229), “entitlement spending” is actually a technical term from public finance used to distinguish the category of public budgetary outlays that are tied to existing benefits and services from annual appropriations, or “discretionary spending.” Glickman dates an alleged shift to the term to the 1970s (250) in conjunction with conservative anti-tax campaigning, however it was already codified in federal statute as a spending category in the immediate post-World War II period, if not earlier.

[3] Tugwell also evinced Soviet sympathies, including publicly expressing an interest in studying and adapting ideas from Stalin’s “experiment” in central planning to the United States. Though “Rex the Red” was pushed out of the Roosevelt administration for his increasingly controversial views in 1936, two other high-ranking New Deal economic advisors, Laughlin Currie and Harry Dexter White, would later be credibly implicated in Soviet espionage.

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Phil Magness is a Senior Research Fellow at the American Institute for Economic Research. He is the author of numerous works on economic history, taxation, economic inequality, the history of slavery, and education policy in the United States

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on March 19, 2020 at 07:42:10 am

This is an important piece, and it seems to me vital that classical liberal and conservative scholars keep on top of this material, and engage with it critically. My only slight caveat, is that Leonard Read's 'I Pencil' is, indeed, pretty strongly religious in its inspiration (if you can forgive self-advertising, see, for a brief account, https://fee.org/articles/leonard-read-the-spiritual-economist/). To call this inspiration 'Christian', however, involves taking a pretty broad view of Christianity!

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

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